Questions I'm strugging with

Hey everyone, any help would be appreciated! An investor holds a short position in four gold futures contracts. Each is for 100 ounces of golf. Starting price was 350\$/ounce. Initial margin = \$1,750 per contract and maintenance is 1,312.50 per contract. Day 1 345.50 Day 2 348.75 Day 3 355.50 Day 4 356.25 What will the variation margin be on the first day a margin call is received? A. 500 B. 1,800 C. 2,200 D. 2,500 2. The current 4-year spot rate is 4% and the current 5-year spot rate is 5.5%. What is the 1-year forward rate in 4 years? A. 8.62% B. 9.58% C. 10.14% D. 11.72% 3. Dagmar has 41.m shares with current mkt = 50/share. Dagmar made \$200m in profits for the recent Q and since only 70% of profits will be reinvested, the Board is considering repurchasing \$60m in common stock (assuming it can be repurchased at 50/share). They decide to borrow the . Info: Shares o/s before buyback = 41.2m EPS before buyback = \$10 Earnings yield = \$10/50 = 20% After tax cost of borrowing = 8% Planned buyback = 1.2mil shares Dagmar’s EPS after repurchase of commons stock will be closest to: A. 5.03 B. 8.25 C. 10.18 D. 12.35 Thanks everyone, just a couple more weeks to go!

stogart Wrote: ------------------------------------------------------- > 2. The current 4-year spot rate is 4% and the > current 5-year spot rate is 5.5%. What is the > 1-year forward rate in 4 years? > > A. 8.62% > B. 9.58% > C. 10.14% > D. 11.72% Five year rate=4 year rate * 1 year forward 4 years from now (1.055)^5=(1.04)^4 * (1+x) X=.117195 D.

C,D,C

C,D and about the last one… moto can you show your work?

There was a question just like the last one in June.

I’m not sure if it’s right, but this is what I did: 41.2m shares * EPS of 10\$ = \$412m 60m * .08 = 4.8m (interest expens) 41.2m - 4.8m = \$407,200,000 # of shares remaining = 41.2m - 1.2m = 40m \$407,200,000/40,000,000 = 10.18

ic…so we dont have to account for the recent qtr earning of 200m?

how do u guys get C for the first q? Thanks. D and C for Q 2&3.

1. Dagmar has 41.m shares with current mkt = 50\$/share. Dagmar made \$200m in profits for the recent Q and since only 70% of profits will be reinvested, the Board is considering repurchasing \$60m in common stock (assuming it can be repurchased at 50/share). They decide to borrow the . Info: Shares o/s before buyback = 41.2m EPS before buyback = \$10 Earnings yield = 10/50 = 20% After tax cost of borrowing = 8% Planned buyback = 1.2mil shares Dagmar's EPS after repurchase of commons stock will be closest to: A. 5.03 B. 8.25 C. 10.18 D. 12.35 Earnings = 41.2 \* 10 = 412 So revised EPS = (412 - 60 \* .08) / 40 = 10.18 (Choice C) An investor holds a short position in four gold futures contracts. Each is for 100 ounces of golf. Starting price was 350/ounce. Initial margin = \$1,750 per contract and maintenance is \$1,312.50 per contract. Day 1 345.50 Day 2 348.75 Day 3 355.50 Day 4 356.25 What will the variation margin be on the first day a margin call is received? A. 500 B. 1,800 C. 2,200 D. 2,500 Initial Margin: 7000 Maint Margin = 5250 Day 1 Diff: (350 - 345.5) * 4 * 100 = 1800 Gain Day 2 Start Margin = 8800 Diff= (348.75 - 345.5) * 400 = -1300 Day 3: Start Margin = 7500 Diff = (355.5 - 348.75) * 400 = -2700 Day 4: Start margin = 4800 Fell below 5250 So variation margin = 7000 - 4800 = 2200 Choice C

CDC

Shortcut: For the gold futures question, you can skip straight to Day 3 - because you won’t get a margin call when you are standing at a profit! So on day 3, each contract is \$550 underwater, and 1750-550 =1200 < maintenance margin. So to bring it back to initial margin, you need to pay back in the loss, which is 550*4 = \$2200.

Sorry it took my so long to get back to you guys with the answers, was out of the office. Its C,D,C just like it was answered. Thanks for the assistance. It seems like everyone else is posting Q’s they don’t understand on this board so hopefully it’s ok if I continue to do so! Thanks again everyone!

Of cousre it’s ok. It’s great practice for everyone. Keep posting them.

got c,d,c too… keep on posting.